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Investing.com - Goldman Sachs has upgraded Nexans (EPA:NEXS) SA (PAR:NEX) (OTC:NXPRF) from Neutral to Buy and raised its price target to EUR125.00 from EUR112.00, implying approximately 15% upside potential.
The upgrade is based on Nexans’ recent return to growth in backlog and improved visibility on medium-term supply/demand utilization beyond 2026 with better mix. Goldman Sachs’ estimates for Nexans’ Transmission segment in 2027/28 are 16% and 30% ahead of consensus, respectively.
Goldman Sachs expects Nexans’ Transmission margins to move closer to competitor Prysmian (BIT:PRY)’s levels, with return on invested capital projected to exceed the sector average. The firm notes that this comes at a time when Nexans has an unlevered balance sheet and its valuation remains depressed compared to the capital goods sector.
While Goldman Sachs acknowledges challenges in full utilization of Nexans’ Transmission assets over the next two years, it sees improved medium-term support as the company’s backlog has resumed growth. The firm now forecasts 90% utilization for 2025-28, up from 63% previously, with margin mix expected to improve as more backlog shifts to post-2022 tenders.
Goldman Sachs also views the cyclical parts of Nexans’ portfolio (Connect/Metallurgy) as more resilient to US/China macroeconomic uncertainty compared to the capital goods sector average, while being well-positioned to benefit from German infrastructure and Climate funds.
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